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Mobilizing  Money 
for  War 


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Guaranty  Trust  Company 
of  New  York 


Mobilizing  Money 
for  War 


1917 

^vij|-r*  t/     Guaranty  Trust  Company  of  New  York 

140  Broadway 

Fifth  Avenue  Office :  Fifth  Avenue  and  43d  Street 

London  Office :  32  Lombard  Street,  E.  C. 

Paris  Office:  Rue  des  Italiens  1  &  3 


COPYRIGHT,  1917 
BY  GUARANTY  TRUST  COMPANY  OF  NEW  YORK 


Mobilizing  Money 
for  War 


/^UR  Government  needs  funds  for  war. 
^-^Part  of  this  money  will  be  raised  by 
taxation,  and  part  by  a  great  popular  loan 
to  which  the  public  will  be  given  every  oppor- 
tunity to  subscribe.  The  United  States  is 
today  the  richest  country  in  the  world.  The 
demands  of  the  war  are  imperative.  The 
nation's  wealth  must  meet  the  nation's  needs. 

The  American  people  are  not  yet  educated 
to  the  purchase  of  bonds  as  are  the  people  of 
other  countries.  Less  than  one-fifth  of  one 
per  cent,  of  the  people  of  the  United  States 
own  bonds,  and  only  a  fraction  of  these  are 
holders  of  Government  securities.  In  both 
France  and  England,  more  than  eleven  per 
cent,  of  the  people  have  helped  individually 
[3] 


360182 


to  finance  those  countries  in  performing  their 
part  in  the  present  war. 

The  Government  has  a  sound  basis  for  its 
belief  in  the  patriotism  of  the  bankers  and  the 
investors  of  the  country,  and  for  its  anticipa- 
tion that  they  will  give  their  enthusiastic  co- 
operation in  the  support  of  this  loan.  In 
order  to  assure  its  success,  however,  this  co- 
operation must  be  broad  and  deep.  It  must 
extend  far  beyond  ordinary  channels  of  in- 
vestment. Thousands  of  persons  who  never 
have  purchased  bonds,  who  never  have  been 
in  touch  with  financial  houses,  must  become 
investors  in  this  issue.  It  has  an  appeal  not 
only  to  patriotism,  but  to  reason  and  to  busi- 
ness sense.  The  whole  nation  must  be 
quickened  to  a  complete  understanding  of 
the  spirit  and  the  meaning  of  this  invest- 
ment. America  must  enlist  its  wealth  as  well 
as  its  manhood. 


[4] 


The  following  is  an  outline  of  the  hill  now 
before  Congress^  recommended  by  the  Secre- 
tary of  the  Treasury 9  William  0.  McAdoo: 

The  Secretary  of  the  Treasury  is  authorized 
to  borrow  on  the  credit  of  the  United  States 
in  order  to  meet  expenditures  for  the  National 
defense,  $7,000,000,000,  in  addition  to  certain 
sums  heretofore  authorized  by  Congress. 
Under  regulations  prescribed  by  the  Secre- 
tary of  the  Treasury,  bonds  not  in  excess  of 
$5,000,000,000,  and  one-year  notes  not  in 
excess  of  $2,000,000,000,  will  be  issued,  the 
rate  of  interest  not  to  exceed  three  and  one- 
half  per  cent.  If  any  subsequent  series  of 
bonds  is  issued  prior  to  December  31,  1918, 
at  a  rate  of  interest  higher  than  that  of  the 
bonds  issued  under  this  law,  this  series  may 
be  converted  by  the  Secretary  of  the  Treas- 
ury into  bonds  bearing  the  higher  rate  of 
interest. 

Under  regulations  prescribed  by  the  Secre- 
tary of  the  Treasury,  bonds  will  be  placed  on 

[5] 


the  market  for  popular  subscription  at  par, 
and  any  bonds  not  subscribed  for  will  be 
otherwise  disposed  of  by  the  Secretary  of  the 
Treasury.  No  commissions  will  be  paid  in 
making  disposition  of  the  bonds.  Bonds 
will  be  exempt,  both  as  to  principal  and  inter- 
est, from  Federal  and  State  taxation,  except 
estate  and  inheritance  taxes.  Bonds  and 
notes,  however,  will  not  bear  the  circulation 
privilege. 

For  the  purpose  of  establishing  credit  in 
the  United  States  for  foreign  governments, 
the  Secretary  of  the  Treasury  is  authorized 
to  purchase  from  foreign  governments,  at  par, 
from  the  proceeds  of  bonds  issued  under  this 
law,  obligations  not  exceeding  $3,000,000,000, 
bearing  the  same  rate  of  interest  and  con- 
taining essentially  the  same  terms  and  con- 
ditions as  those  issued  by  the  United  States. 
If  United  States  bonds  are  subsequently 
converted  into  bonds  bearing  a  higher  rate 
of  interest,  as  provided  above,  the  foreign 
government  bonds  purchased  by  the  United 
States,  shall  be  converted  into  bonds  bearing 
[6] 


the  increased  rate  of  interest  of  the  United 
States  bonds  so  converted.  Foreign  govern- 
ments may  pay  oflP  before  maturity,  or  the 
Government  may  sell,  at  not  less  than  the 
purchase  price,  bonds  purchased  by  the  United 
States,  and  the  funds  so  realized  will  be  used 
to  redeem  or  purchase  outstanding  interest- 
bearing  obligations  of  the  United  States. 


The  wealth  of  America  is  increasing  be- 
yond all  precedent  or  parallel.  In  the  last 
seven  years,  our  national  income  has  in- 
creased almost  33%  per  cent.;  in  the  last 
seventeen  years,  it  has  grown  nearly  117  per 
cent. 

Our  foreign  trade  for  the  calendar  year 
1916  reached  the  enormous  sum  of  nearly 
eight  billion  dollars.  This  surpasses  the  com- 
bined totals  of  1911  and  1912,  and  is  more 
than  two  and  one-half  billions  greater  than 
the  returns  for  1915.  In  the  trade  figures 
[7] 


of  nations,  there  are  no  records  comparable 
to  these. 

America  has  prospered  greatly  since  August 
1,  1914.  In  the  thirty-one  months  that  have 
elapsed  since  then,  our  foreign  trade  balance 
has  attained  the  huge  total  of  five  and  three- 
quarter  billion  dollars.  This  amount  of 
money  is  almost  six  times  the  national  debt 
of  the  United  States  as  of  April  1, 1917. 

The  Government's  outstanding  interest- 
bearing  public  debt  on  the  above  date  was 
less  than  one  billion  dollars  principaly — only 
one-fortieth  of  the  nation's  present  annual 
income. 

This  nation  possesses  one-third  of  the 
world's  stock  of  gold — nearly  three  billion 
dollars. 

The  national  assets  of  the  United  States 
equal  the  combined  wealth  of  Great  Britain, 
Russia,  France,  and  Italy.  America  today 
has  two  and  a  quarter  times  as  much  wealth 
as  Great  Britain;  four  times  as  much  as 
[8] 


France  and   eight  times  as  much  as  Italy. 
It  is  the  richest  nation  in  all  history. 

Great  Britain  has  borrowed  a  little  more 
than  one-fourth  of  the  amount  of  her  na- 
tional wealth;  the  borrowings  of  France  and 
Russia  are  less  than  one-fifth,  and  Italy's 
proportion  is  but  a  little  more  than  one- tenth. 
Judging  from  these  figures,  the  borrowing  ca- 
pacity of  the  United  States,  with  its  two  hun- 
dred billions  of  wealth,  should  be  more  than 
forty  billions.  It  is  inconceivable  that  such 
a  sum  will  be  necessary,  but  whatever  amount 
our  national  honor  demands,  should  be  raised 
by  the  contributions  of  the  whole  nation  and 
from  the  resources  of  all  the  people. 

While  the  banking  institutions  of  the 
United  States  may  be  confidently  relied  upon 
to  take  up  their  full  share  of  this  loan,  it  must 
be  remembered  that  it  would  not  be  for  the 
best  interests  of  the  country  to  have  them 
assume  more  than  their  proper  amount  of 
the  burden.  These  institutions  are  relied 
upon  by  our  great  manufacturing  and  trade 

[9] 


enterprises,  whose  activities  will  probably 
be  increased  by  our  entrance  into  war,  to 
provide  them  with  credit  with  which  to  carry 
on  their  commercial  activities.  Any  reduc- 
tion of  such  credits,  necessitated  by  too  large 
a  participation  in  the  government  loan,  would 
be  a  blow  to  the  country's  industries.  It  is 
evident,  therefore,  that  the  bulk  of  the  loan 
should  be  taken  by  the  public  at  large,  and 
not  by  the  bankers. 

The  Secretary  of  the  Treasury  has  an- 
nounced that  it  is  the  purpose  of  his  Depart- 
ment, in  effecting  the  distribution  of  the 
bonds,  to  seek  the  assistance  of  Federal  Re- 
serve banks,  national  banks,  state  banks, 
trust  companies,  savings  banks,  insurance 
companies,  private  bankers,  and  investment 
bankers  throughout  the  country.  In  addition, 
every  governmental  agency,  such  as  Internal 
Revenue  oflSces  and  post  offices,  will  be  asked 
to  assist  in  distributing  the  bonds.  That  this 
work,  in  itself,  will  be  of  incalculable  service 
to  the  nation  is  evident  from  the  fact  that 
the  laws  of  the  United  States  forbid  the 
[10] 


payment  of  commissions  on  sales  of  Gov- 
ernment bonds.  Bankers  and  distributing 
agents,  therefore,  will  give  their  services  to 
the  Government,  not  only  without  profit  to 
themselves,  but  entirely  free  of  charge. 

The  duty  of  seeing  that  these  loans  are 
bought — and  bought  speedily — thus  devolves 
upon  the  public,  upon  the  average  citizen. 

Not  often  have  our  citizens  been  given  a 
chance  to  show  their  confidence  in  the  Gov- 
ernment by  lending  their  money.  When 
they  were  asked  to  do  so  during  the  Civil 
and  Spanish-American  wars,  their  action  was 
prompt  and  generous. 

The  history  of  the  United  States  proves 
abundantly  that  our  people  do  not  hesitate 
when  the  life,  the  integrity,  or  the  dignity 
of  the  nation  is  at  stake.  The  historic 
$500,000,000-bond  issue  of  1862  is  a  conspic- 
uous example  of  the  readiness  of  our  citizens 
to  support  their  Government.  It  was  pur- 
chased directly  by   the  people,  at  par,   in 

[11] 


currency.  During  the  war  with  Spain,  the 
mobihzation  of  money  was  accomplished  with 
astonishing  rapidity  A  Government  bond 
issue  for  $200,000,000  at  three  per  cent,  was 
offered  at  par  and  was  nearly  eight  times 
over-subscribed.  So  popular  was  this  loan 
that  it  went  to  a  premium  of  six  per  cent, 
within  three  months,  and  rose,  in  the  follow- 
ing year,  to  110%.  Yet  there  were  only 
320,000  subscribers  to  this  loan. 

Although  our  country  is  rich  and  our 
financial  institutions  strong,  it  is  the  people 
who  must  subscribe  to  this  great  loan  if  it 
is  to  be  successful. 

This  war  is  the  concern  of  every  citi- 
zen of  the  United  States. 

Each  must  do  his  share. 

Patriotism  means  both  Loyalty  and 
Sacrifice. 


[12] 


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UNIVERSITY  OF  CAUFORNIA  UBRARY 


